This Issue Brief White Paper is to address issues that may arise when valuing the equity in ESOP-owned companies that have synthetic equity, or similar arrangements, embedded in their capital structure. It is specifically addressed to ESOP trustees and fiduciaries charged with approving the valuations of ESOP held employer securities. This Issue Brief White Paper was recently released by The ESOP Association’s Advisory Committee on Valuation.

The ESOP Association wishes to acknowledge, and express its thanks, to the volunteer members of the Association’s Advisory Committee on Valuation who worked on this project and the Committee Chair, Jeffrey Tarbell, ASA, CFA, Director, Houlihan Lokey, San Francisco, CA.

Valuing Synthetic Equity is available on The ESOP Association’s website, www.esopassociation.org. For additional information, email pubs@esopassociation.org, or call 202/293-2971.

Issue Brief #27, A Framework for Understanding the Impact of Repurchase Obligation on Share Price, has been published by The ESOP Association. It was written by members of the Association’s Advisory Committee on Valuation. Special thanks to the members of the Committee and Committee Chair, Jim Ahern, Managing Director of ComStock Advisors of Wheaton, IL for their work on this project.

The Preamble:

The ESOP Association’s Advisory Committee on Valuation (“ACV”) of recently published Issue Brief No. 25, The Integrated Relationships of ESOP Repurchase Obligation and Valuation, to help further the discussion of the impact of repurchase obligation on the valuation of ESOP companies. That White Paper stressed the importance for private companies to plan for and manage their ESOP repurchase obligation in the context of a retirement benefit, ownership structure, and demand for capital. The ACV continues the discussion in this white paper by introducing the concept of opportunity cost.